LONDON – The pharma industry in the U.K. is turning to the courts to prevent a new "budget impact" test being used to bring down drug prices.

The test, introduced on April 1, means that any drug determined by the health technology assessment body NICE as being cost-effective will nonetheless automatically be referred for "commercial discussions" to reduce the price if it will cost more than £20 million (US$25.7 million) per annum in any of the first three years. (See BioWorld Today, March 23, 2017.)

The Association of the British Pharmaceutical Industry (ABPI) and the Bioindustry Association objected when the test was announced. Now, after prolonged backroom exchanges, ABPI said it has "reluctantly" applied for a judicial review on the grounds that the budget impact test breaches the National Health Service (NHS) constitution.

"After many months of raising concerns with NICE, NHS England and the Department of Health, and offering to work constructively on alternative proposals, we have applied to formally challenge these proposals in court," said Mike Thompson, ABPI chief executive.

Companies frequently have to offer reductions on the list price of drugs in order to pass NICE's cost-effectiveness thresholds and secure a recommendation that a product should be used in the NHS. The NHS constitution, which sets out rights for patients, said any products recommended by NICE must be made available to any eligible patient within 90 days. Under the budget impact test, any drug that would cost the NHS more than £20 million per annum will in the future be phased in over three years.

ABPI said the NHS has a mandatory duty to fund any drug NICE recommends and it is wrong to introduce an additional price negotiation process.

NICE's own analysis shows one in five of the new drugs entering its review process after April 1 will be affected.

The budget impact test will delay access to cost-effective drugs for conditions including cancer, heart disease and diabetes, Thompson said. "It is important to challenge these new procedures before the first medicines get caught in the system, creating uncertainty for patients about whether they will be able to receive them."

Patients' groups have objected not only because of likely delays in access, but also because the budget impact test is to be assessed by multiplying the cost per treatment by the number of patients, meaning there is a disproportionate effect in more prevalent conditions.

Products that are available on the NHS but which would not have passed the budget impact test had it been in place when NICE reviewed them include Gilead Sciences Inc.'s Sovaldi (sofosbuvir) and Merck & Co. Inc.'s Keytruda (pembrolizumab).

After weighing in when the budget impact test was announced, Delyth Morgan, chief executive of the charity Breast Cancer Now, said she remains "extremely concerned" that it will cause delays in accessing cost-effective drugs.

"We will now be monitoring the progress of this possible legal action closely and hope that it will provide clarity on the issue of timely access to drugs. We, alongside many other charities, remain ready and willing to work with all involved to look at how this critical issue can be resolved," Morgan said.

Awkward timing?

NICE did not comment on ABPI's decision to seek a judicial review, but has been explicit that the aim is to cut the drugs budget. Companies whose drugs will cost more than £20 million per annum "will have the opportunity of confidential negotiation," Andrew Dillon, chief executive of NICE, said when he announced the budget impact test.

NHS spending on drugs rose from $19.3 billion in 2014-2015 to $21.6 billion in 2015-2016. However, at 10 percent of the overall health care budget, that is proportionately less than most other developed countries.

ABPI is aggrieved not only because passing NICE's cost-effectiveness reviews frequently means giving a reduction on the list price, but also because the rate of return for the industry already is subject to control through the Pharmaceutical Price Regulation Scheme.

That is a voluntary agreement under which the industry agreed to keep NHS expenditure on patented drugs flat for two years and restrict growth to under 2 percent for the following three years. The industry has made payments of £1.87 billion (US$2.4 billion) to underwrite the growth in patented drugs covered by the scheme in the 3.5 years since it came into effect in January 2014.

By its own admission, setting up the scheme involved "the most complex pricing negotiations ever experienced," which makes it all the more surprising that ABPI has lost patience with the Department of Health and the NHS and failed to reach a compromise over the budget impact test.

It also is awkward to be resorting to a legal challenge at a time when the ABPI is in the thick of a mass lobbying campaign to persuade the government to accept the industry's view on key issues relating to the U.K. withdrawal from the EU, such as a regulation, trade, immigration and science.

Thompson said it is the right course of action to refer the budget impact test to judicial review. "We hope the government will reverse the changes and work with us to find a solution that works for everyone."